While nonresidential construction’s cycle tends to lag that of the overall economy by roughly a year, gains in momentum for the U.S. economy mean that nonresidential construction is poised for better times ahead.
The national construction unemployment rate fell to 7.5% on a non-seasonally adjusted basis in July.
The most recent July is associated with the most solid labor force expansion observed since 1996.
The impact of a brutal winter continues to manifest itself in the data.
The next few months should be associated with improving performance, if not on a monthly basis, then on a year-over-year one.

Aug 01, 2014

WASHINGTON — According to the Bureau of Labor Statistics August 1 preliminary employment report, the U.S. construction industry added 22,000 jobs in July with nonresidential construction contributing 6,600 of those jobs — including 2,500 jobs in the heavy and civil engineering segment — which represents a significant improvement from the 100 nonresidential construction jobs added the previous month.

In the U.S. Census Bureau report analyzing construction spending for June, nonresidential construction spending fell for the month after posting significant gains the two prior months, but remains 4.6% higher from a year ago. Spending for June totaled $588.8 billion on a seasonally adjusted, annualized basis, a 2.8% drop from the upwardly revised $605.6 billion in nonresidential construction spending from the previous report.

“Economic news continues to improve as the U.S. economy has now added more than 200,000 jobs a month for six consecutive months, the first winning streak of this type since 1997,” said Associated Builders and Contractors Chief Economist Anirban Basu. “While nonresidential construction’s cycle tends to lag that of the overall economy by roughly a year, gains in momentum for the U.S. economy mean that nonresidential construction is poised for better times ahead. While the 6,600 nonresidential jobs added last month may hardly seem earth-shattering, it’s important to note that the U.S. economy only expanded by around 1% during the first six months of the year. The renewal of economic momentum remains in its infancy, but this momentum will gradually translate into an acceleration of nonresidential employment creation.”

The national construction unemployment rate fell to 7.5% on a non-seasonally adjusted basis in July. “July’s construction unemployment rate represents the lowest figure since November 2007, the month before the recession began,” said Basu. “The rate of unemployment is even lower in certain rapidly expanding states, including North Dakota, Texas and Louisiana, which are wrestling with too few construction workers, not too many.”

According to the Bureau of Labor Statistics’ household survey, the national unemployment rate inched up a tenth of a point in July to 6.2%. That should not be viewed as bad news, however, as the labor market expanded by 329,000 people and labor force participation crept up to 62.9%.

“Historically, July is not a good month for labor force growth,” said Basu. “But the most recent July is associated with the most solid labor force expansion observed since 1996.”

“Before nonresidential construction stakeholders become too excited, it should be noted that the recovery of the U.S. labor market is not unfettered good news,” Basu concluded. “Growing evidence of emerging wage pressures is likely to translate into higher interest rates, if not now, then at some point. That would likely temper at least some of the industry momentum presently building.”

Individual sectors saw the following changes:

Nonresidential building construction employment fell by 400 jobs for the month, but is up by 21,100 jobs, or 3.1%, since July 2013.

Residential building construction employment rose by 6,100 jobs in July and is up by 54,400 jobs, or 8.9%, on an annual basis.

Nonresidential specialty trade contractors added 7,000 jobs for the month and employment in that category is up by 40,800 jobs, or 1.9%, from the same time one year ago.

Residential specialty trade contractors gained 6,900 jobs in July and have added 61,200 jobs, or 3.9%, since July 2013.

The heavy and civil engineering construction segment gained 2,500 jobs in July and job totals are up by 33,800, or 3.8%, on a year-over-year basis.

Nonres Spending Growth Falters in June

“The monthly decline in spending should not be cause for significant alarm,” said Basu. “The impact of a brutal winter continues to manifest itself in the data. A considerable volume of construction was postponed during the year’s initial months with some of that construction taking place in April and May, artificially boosting activity during those months. Accordingly, June doesn’t look particularly good from a month-over-month perspective, but from a year-over-year perspective, the growth in spending looks perfectly adequate. Stakeholders should not have anticipated an upbeat June number in any case after national nonresidential construction employment expanded by just 100 people that month.”

“With job growth accelerating, consumer outlays expanding, industrial production rising and energy production surging, the outlook for nonresidential construction remains good,” said Basu. “The next few months should be associated with improving performance, if not on a monthly basis, then on a year-over-year one.”

Five of 16 nonresidential construction subsectors posted increases in spending in June on a monthly basis.

Office-related construction spending grew by 0.4% in June and is up 20.7% from the same time one year ago.

Religious spending grew 0.7% for the month and is up 4.3% from the same time last year.

Sewage and waste disposal-related construction spending gained 0.3% for the month and has grown 7.8% on a 12-month basis.

Conservation and development-related construction spending expanded by 13.5% for the month and is up 47.6% on a yearly basis.

Health care-related construction spending grew 2.5% for the month, but is down 5.6% on an annual basis.